-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, We6s4CGUUWzM8M9jC/0cFIkVMZ5qtPgMB0sImw5w+8BD5VudYTqJW4Iu7M+UEN9W F+C8rqUDxWpL0LfcB/8Zgg== 0001005477-01-000881.txt : 20010214 0001005477-01-000881.hdr.sgml : 20010214 ACCESSION NUMBER: 0001005477-01-000881 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GROVE WORLDWIDE LLC CENTRAL INDEX KEY: 0001064526 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 232955766 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-57611 FILM NUMBER: 1538488 BUSINESS ADDRESS: STREET 1: 1565 BUCHANON TRAIL EAST CITY: SHADY GROVE STATE: PA ZIP: 17256 BUSINESS PHONE: 7175978121 MAIL ADDRESS: STREET 1: 1565 BUCHANON TRAIL EAST CITY: SHADY GROVE STATE: PA ZIP: 17256 10-Q 1 0001.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (MARK ONE) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 30, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ ---- Commission File Number 333-57611 ---- GROVE WORLDWIDE LLC (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) ---- 23-2955766 (I.R.S. Employer Identification Number) ---- 1565 Buchanan Trail East Shady Grove, Pennsylvania 17256 (717) 597-8121 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---- Indicate by check mark whether the registrant (1) has filed all the reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes |X| No |_| APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes |_| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. None. Grove Worldwide LLC Index to Quarterly Report on Form 10-Q For the Quarterly Period Ended December 30, 2000 Page ---- Part I Item 1 Financial statements Condensed Consolidated Balance Sheets as of September 30, 2000 and December 30, 2000 .................. 1 Condensed Consolidated Statements of Operations for the three months ended January 1, 2000 and December 30, 2000 ...................................................... 2 Condensed Consolidated Statements of Comprehensive Loss for the three months ended January 1, 2000 and December 30, 2000 ...................................................... 3 Condensed Consolidated Statements of Cash Flows for the three months ended January 1, 2000 and December 30, 2000 ................................ 4 Notes to Condensed Consolidated Financial Statements ................................................ 5 Item 2 Management's discussion and analysis of financial condition and results of operations ............................. 15 Item 3 Quantitative and qualitative disclosures about market risk ............................................................ 19 Part II Item 1 Legal proceedings ............................................... 20 Item 2 Changes in securities ........................................... 20 Item 3 Defaults upon senior securities ................................. 20 Item 4 Submission of matters to a vote of security holders ............. 20 Item 5 Other information ............................................... 20 Item 6 Exhibits and reports on form 8-K ................................ 20 Signatures ...................................................... 21 i Unless otherwise noted, the "Company" or "Grove" refers to Grove Worldwide LLC and its subsidiaries. The Company's fiscal year ends on the Saturday closest to the last day of September. References to the (i) three months ended January 1, 2000 means the period from October 3, 1999 to January 1, 2000; (ii) three months ended December 30, 2000 means the period from October 1, 2000 to December 30, 2000; References to historical financial information are to the historical combined and consolidated financial statements of the Company. See "Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations." No separate financial statements of the subsidiary guarantors (as defined) and Grove Capital, Inc. ("Grove Capital") are included herein. The Company considers that such financial statements would not be material to investors because: (i) this report does include, in the notes to the consolidated financial statements of the Company, supplemental financial information, setting forth on a consolidated basis, balance sheets, statements of operations and cash flows information for the subsidiary guarantors, the subsidiaries of the Company that are not guarantors (the "non-guarantor subsidiaries") and the Company; and (ii) the above-mentioned note provides sufficient detail to allow investors to determine the nature of the assets held by, and the operations and cash flows of the subsidiary guarantors and Grove Capital. ii SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS Certain statements in this report constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result," "are expected to," "will continue," "anticipates," "expects," "estimates," "intends," "plans," "projects," and "outlook") are not historical facts and may be forward-looking. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, cost savings, performance or achievements of the Company, or industry results, to be materially different from any future results, levels of activity, cost savings, performance or achievements expressed or implied by such forward-looking statements, and accordingly, such statements should be read in conjunction with and are qualified in their entirety by reference to, such risks, uncertainties and other factors, which are discussed throughout this report. Such factors include, among others, the following: o substantial leverage, ability to service debt, and the ability of the Company to comply with financial and other covenants in the Company's credit agreement. In fiscal 1999 and fiscal 2000, the Company was required to obtain waivers and amendments to its credit agreement to remain in compliance with certain financial covenants. In connection with the most recent amendments, the credit agreement was modified to place significant restrictions on the amount of borrowings available to the Company for working capital purposes, particularly during the period through April 30, 2001, a period during which the Company's need for working capital is projected to be the greatest. Management believes the Company should be able to comply with its existing bank financial covenants and should have sufficient cash flow to meet the Company's obligations as they become due. If the Company is unable to sufficiently reduce working capital, the Company would not be able to reduce total outstanding borrowings and letters of credit below $40 million for the 14-day period ending April 16, 2001 and to below $35 million for the 5-day period ending April 23, 2001, as required by the Bank Credit Facility. If the Company were unable to comply with the covenants in the Bank Credit Facility, in order to avoid default it would be required to obtain additional modifications to its Bank Credit Facility and/or additional sources of funding. There can be no assurance that, if needed, such modification would be agreed to by the bank credit facility lenders or such funding would be available; o changing market trends in the mobile hydraulic crane, aerial work platform and truck-mounted crane industries; o general economic and business conditions including a prolonged or substantial recession; o the ability of the Company to implement its business strategy and maintain and enhance its competitive strengths; o the ability of the Company to obtain financing for general corporate purposes; o competition; o availability of key personnel; o industry overcapacity; and o changes in, or the failure to comply with, government regulations. As a result of the foregoing and other factors, no assurance can be given as to future results, levels of activity and achievements, and neither the Company nor any other person assumes responsibility for the assurance and completeness of these forward-looking statements. Any forward-looking statements contained herein speak solely as of the date on which such statements are made, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements were made or to reflect the occurrence of unanticipated events. iii PART I Item 1. Financial Statements GROVE WORLDWIDE LLC AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited and in thousands) September 30, December 30, 2000* 2000 ------------- ------------ Assets Current assets: Cash and cash equivalents $ 16,102 $ 5,593 Cash restricted as to use 1,688 2,939 Trade receivables, net 131,405 105,509 Notes receivable 6,801 2,835 Inventories 175,181 192,004 Net assets of subsidiary held for sale 3,308 -- Prepaid expenses and other current assets 10,116 12,615 --------- --------- Total current assets 344,601 321,495 Property, plant and equipment, net 168,696 167,512 Goodwill, net 199,861 202,941 Other assets 12,977 13,324 --------- --------- $ 726,135 $ 705,272 ========= ========= Liabilities and Member's Equity Current liabilities: Current maturities of long-term debt $ 37,000 $ 37,100 Short-term borrowings 20,967 21,118 Accounts payable 75,780 63,490 Accrued expenses and other current liabilities 83,064 87,274 --------- --------- Total current liabilities 216,811 208,982 Deferred revenue 37,170 34,413 Long-term debt 399,000 398,000 Other liabilities 84,865 84,190 --------- --------- Total liabilities 737,846 725,585 --------- --------- Member's equity: Invested capital 164,289 164,289 Accumulated deficit (152,082) (166,527) Accumulated other comprehensive loss (23,918) (18,075) --------- --------- Total member's equity (11,711) (20,313) --------- --------- $ 726,135 $ 705,272 ========= ========= See accompanying notes to condensed consolidated financial statements. * Amounts have been derived from the Company's audited consolidated balance sheet. 1 GROVE WORLDWIDE LLC AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the three months ended January 1, 2000 and December 30, 2000 (unaudited and in thousands) Three Months Ended January 1, December 30, 2000 2000 ---------- ------------ Net sales $ 185,361 $ 173,384 Cost of goods sold 155,487 149,204 --------- --------- Gross profit 29,874 24,180 Selling, engineering, general and administrative expenses 27,902 21,755 Amortization of goodwill 1,771 1,399 Restructuring charges 4,978 1,632 --------- --------- Loss from operations (4,777) (606) Interest expense, net (9,941) (13,732) Other income (expense), net (116) 493 --------- --------- Loss before income taxes (14,834) (13,845) Income taxes 462 600 --------- --------- Loss before cumulative effect of change in accounting principle (15,296) (14,445) Cumulative effect of a change in accounting principle (note 8) 302 -- --------- --------- Net loss $ (14,994) $ (14,445) ========= ========= See accompanying notes to condensed consolidated financial statements. 2 GROVE WORLDWIDE LLC AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Loss For the three months ended January 1, 2000 and December 30, 2000 (unaudited and in thousands) Three Months Ended January 1, December 30, 2000 2000 ---------- ------------ Net loss $(14,994) $(14,445) Recognition of loss on cash flow hedges of forecasted foreign currency transactions through charge to earnings -- 992 Change in foreign currency translation adjustment (1,275) 4,851 -------- -------- Comprehensive loss $(16,269) $ (8,602) ======== ======== See accompanying notes to condensed consolidated financial statements. 3 GROVE WORLDWIDE LLC AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the three months ended January 1, 2000 and December 30, 2000 (unaudited and in thousands)
Three Months Ended January 1, December 30, 2000 2000 ---------- ------------ Cash flows from operating activities: Net loss $(14,994) $(14,445) Adjustments to reconcile to net loss to net cash provided by (used in) operating activities: Depreciation and amortization 5,043 5,060 Depreciation of equipment held for rent 3,319 975 Amortization of deferred financing costs 622 429 Loss on sales of property, plant and equipment 13 13 Deferred income tax expense (benefit) (132) 45 Changes in operating assets and liabilities: Trade receivables, net 19,437 29,883 Notes receivable 4,251 3,966 Inventories (2,307) (10,954) Trade accounts payable 7,186 (15,659) Other assets and liabilities, net (10,428) (5,374) -------- -------- Net cash provided by (used in) operating activities 12,010 (6,061) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (1,321) (2,134) Investment in equipment held for rent (714) (1,600) -------- -------- Net cash used in investing activities (2,035) (3,734) -------- -------- Cash flows from financing activities: Net short-term borrowings (repayments) (3,566) 151 Borrowings (repayments) of long-term debt,net 14,000 (900) Other 22 -- -------- -------- Net cash provided by (used in) financing activities 10,456 (749) -------- -------- Effect of exchange rate changes on cash (184) 35 -------- -------- Net change in cash and cash equivalents 20,247 (10,509) Cash and cash equivalents, beginning of period 16,864 16,102 -------- -------- Cash and cash equivalents, end of period $ 37,111 $ 5,593 ======== ========
See accompanying notes to condensed consolidated financial statements. 4 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations. The Company is a sole member limited liability company formed pursuant to the provisions of the Delaware Limited Liability Company Act. Grove Holdings LLC ("Holdings") is the sole member of the Company. All earnings of the Company are available for distribution to Holdings subject to restrictions contained in the Company's debt agreements. Holdings is a sole member limited liability company that is owned by Grove Investors LLC ("Investors"). Interim results for the three-month period ended December 30, 2000 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and notes for the year ended September 30, 2000. (2) Liquidity During the years ended October 2, 1999 and September 30, 2000, the Company incurred significant operating losses that would have resulted in non-compliance with certain financial covenants included in the Company's Bank Credit Facility. The Company obtained waivers of these financial covenant defaults as well as certain covenant modifications to help position the Company for future compliance. Nevertheless, future compliance will depend upon achieving significantly improved operating results during fiscal 2001 and beyond. Furthermore, modifications to the Bank Credit Facility place significant restrictions on the amount of borrowings available to the Company for working capital purposes, particularly during the period through April 30, 2001, a period during which the Company's need is projected to be the greatest. Management has completed a number of initiatives to help improve operating results and cash flows including (i) reduction in Manlift operations, (ii) restructuring of Shady Grove, Pennsylvania manufacturing operations by improving product flow and (iii) reducing the number of sales, marketing, engineering and administrative employees, principally in Shady Grove and the UK. Management believes the Company should be able to comply with its existing bank financial covenants and should have sufficient cash flow to meet the Company's obligations as they become due. However, Management is continuing to review the Company's cash flow requirements particularly projected working capital reductions but there can be no assurance that management's assumptions as to such reductions will be met. If the Company is unable to sufficiently reduce working capital, the Company will not be able to reduce total outstanding borrowings and letters of credit below $40 million for the 14-day period ending April 16, 2001 and to below $35 million for the 5-day period ending April 23, 2001, as required by the Bank Credit Facility. If the Company were unable to comply with the covenants in the Bank Credit Facility, in order to avoid default, it would be required to obtain additional modifications to its Bank Credit Facility and/or additional sources of funding. There can be no assurance that, if needed, such modifications would be agreed to by the Bank Credit Facility Lenders or such funding, if needed, would be available. 5 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ (3) Inventory Inventories consist of the following as of September 30, 2000 and December 30, 2000: September 30, December 30, 2000 2000 ---- ---- Raw materials $ 60,367 $ 63,347 Work in process 51,524 42,447 Finished goods 63,290 86,210 -------- -------- $175,181 $192,004 ======== ======== Inventories are valued at the lower of cost or market, as determined primarily under the first-in, first-out method. (4) Income Taxes A significant portion of the Company's business is operated as a limited liability company organized under the laws of Delaware. Accordingly, earnings of the Company's U.S. mobile hydraulic crane and aerial work platform businesses, as well as, earnings from its foreign subsidiaries will not be directly subject to U.S. income taxes. Such taxable income will be allocated to the equity holders of Investors and they will be responsible for U.S. income taxes on such taxable income. The Company intends to make distributions, in the form of dividends, to enable the equity holders of Investors to meet their tax obligations with respect to income allocated to them by the Company. No distributions were made for taxes in the year ended September 30, 2000 or the three months ended December 30, 2000. The difference between the Company's reported tax provision for the three months ended December 30, 2000 and the tax provision computed based on U.S. statutory rates is primarily attributed to the Company's structure as a limited liability company. (5) Restructuring During the three months ended December 30, 2000, the Company adopted and executed a restructuring plan that resulted in the termination of approximately 220 employees principally in its US operations. In connection with the terminations, the Company accrued severance costs of $1,632. During the three months ended December 30, 2000 the Company paid severance costs of $1,800 related to these terminations and to termination agreements consummated in fiscal 2000. As of December 30, 2000 the Company has remaining severance obligations of $3,200, which it expects to pay through April 2002. (6) Accumulated Other Comprehensive Loss 6 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Accumulated other comprehensive loss as of September 30, 2000 and December 30, 2000 consists of the following: September 30, December 30, 2000 2000 ---- ---- Foreign currency translation adjustment ($22,666) ($17,815) Unrealized net losses on cash flow hedges of foreign currency transactions (992) -- Minimum pension liability (260) (260) -------- -------- ($23,918) ($18,075) ======== ======== (7) Segment Information The Company is an international designer, manufacturer and marketer of a comprehensive line of mobile hydraulic cranes, aerial work platforms and truck-mounted cranes. The Company markets its products through two operating divisions; Grove Crane and National Crane. Grove Crane manufactures mobile hydraulic cranes in its Shady Grove, Pennsylvania and Wilhelmshaven, Germany manufacturing facilities. National Crane manufactures truck-mounted cranes in its Waverly, Nebraska manufacturing facility. Information for each of the Company's operating division's follows:
Corporate, Grove Grove National eliminations, Crane Manlift Crane and other Total ----- ------- ----- --------- ----- As of and for the three months ended December 30, 2000 Net sales $ 157,361 $ -- $ 16,267 $ (244) $ 173,384 Depreciation and amortization 3,402 -- 259 1,399 5,060 Income (loss) from operations 4,729 -- 934 (6,269) (606) Total assets 448,524 -- 38,390 218,358 705,272 Capital expenditures 2,113 -- 21 -- 2,134 As of and for the nine months ended January 1, 2000 Net sales $ 130,237 $ 35,098 $ 20,000 $ 26 $ 185,361 Depreciation and amortization 2,925 82 265 1,771 5,043 Income (loss) from operations 6,916 (1,766) 1,986 (11,913) (4,777) Total assets 455,170 59,083 38,471 295,451 848,175 Capital expenditures 837 182 302 -- 1,321
The Grove Manlift segment has been eliminated in connection with the reduction of Manlift operations that occurred in the fourth quarter of fiscal 2000. Corporate, eliminations and other consist principally of corporate expenses, and assets, including the restructuring charge, goodwill and intercompany eliminations. Depreciation and amortization excludes depreciation of equipment held for rent. (8) Derivative Financial Instruments 7 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ On October 3, 1999 and July 2, 2000, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (an Amendment to SFAS No. 133), respectively. These statements establish accounting and reporting standards for derivative instruments and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities measured at fair value. The net impact of adoption SFAS 133 of $302 was presented as the cumulative effect of a change in accounting principle in the condensed consolidated statements of operations. A summary of the Company's hedging strategies and outstanding derivative instruments are as follows: Interest Rate Risk The Company assesses interest rate cash flow risk by monitoring changes in interest rate exposure that may adversely impact expected future cash flows and by evaluating hedging opportunities. At December 30, 2000, the Company had approximately $210 million of variable rate borrowings under its bank credit facility. Management believes it prudent to limit the variability of its interest payments. To meet this objective, the Company has an interest rate collar arrangement with a multinational bank to limit its exposure to rising interest rates on $100 million of its variable rate bank borrowings. Under the agreement the Company will receive, on a $100 million notional amount, three-month LIBOR and pay 6.5% anytime LIBOR exceeds 6.5%, and will receive three-month LIBOR and pay 5.19% anytime LIBOR is below 5.19%. The contract does not require collateral. The estimated fair value (unrecognized gain) of the interest rate collar at September 30, 2000 and December 30, 2000 was $203 and $8, respectively. Management has concluded that the interest rate collar did not qualify as an effective hedge for accounting purposes as of September 30, 2000 and December 30, 2000. Accordingly, the Company has recognized $195 as other expense in the condensed consolidated statement of operations for the three months ended December 30, 2000. Foreign Currency Risk The Company has foreign operations in the U.K., France, Germany and Australia. Therefore its earnings, cash flows and financial position are exposed to foreign currency risk. In addition, the U.S. company regularly purchases mobile hydraulic cranes from its German factory to meet the demand of its U.S. customers. In order to protect profit margins the Company will purchase forward currency contracts and options to hedge future Deutsche mark payment obligations. At July 1, 2000 the Company had $3.5 million in an outstanding forward contract to purchase Deutsche marks with gross unrealized losses of $0.5 million. The contract will settle in January 2001 and has been marked to market and included in the determination of cost of goods sold for the three months ended December 30, 2000 in accordance with FAS 133, as amended. Currently the Company is not hedging any other foreign currency exposures but it may do so in the future. (9) Net Assets of Subsidiary Held for Sale In late January 2001, after reviewing a number of strategic alternatives, management has made the decision to organize its European AWP business in France around the Delta 8 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Manlift business. As such, we now expect to invest resources in the growth and profitability of Delta Manlift as the company goes forward. The subsidiary is therefore no longer presented as an asset held for sale in the accompanying balance sheet. (10) Supplemental Condensed Combined Financial Information The Company's payment obligations under the Notes are guaranteed by all of the Company's wholly-owned domestic subsidiaries other than Grove Capital, Inc. (the "Subsidiary Guarantors"). Such guarantees are full, unconditional and joint and several. Separate financial statements of the Subsidiary Guarantors are not presented because the Company's management has determined that they would not be material to investors. The ability of the Company's subsidiaries to make cash distributions and loans to the Company and the Subsidiary Guarantors is not significantly restricted under the terms of the Company's debt obligations. The following supplemental financial information sets forth, on a combined basis, balance sheets, statements of operations and statements of cash flows information for the Subsidiary Guarantors, the Company's non-guarantor subsidiaries and for the Company. Information with respect to the Company is related to Grove Worldwide LLC and Grove Capital, Inc. on a combined basis. 9 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Condensed Consolidating Balance Sheet at December 30, 2000
Subsidiary Other Consolidated Company guarantors subsidiaries Eliminations totals ------- ---------- ------------ ------------ ------ Assets Current assets: Cash and cash equivalents $ 92 $ (406) $ 5,907 $ -- $ 5,593 Cash restricted as to use -- 2,939 -- -- 2,939 Trade receivables, net -- 37,359 68,150 -- 105,509 Notes receivable -- 2,835 -- -- 2,835 Inventories -- 112,319 79,685 -- 192,004 Prepaid expenses and other current assets 208 4,073 8,334 -- 12,615 --------- --------- --------- --------- --------- Total current assets 300 159,119 162,076 -- 321,495 Property, plant and equipment, net -- 105,185 62,327 -- 167,512 Goodwill, net -- 188,766 14,175 -- 202,941 Investment and due from subsidiaries 703,304 246,627 36,436 (986,367) -- Other assets 9,740 3,201 383 -- 13,324 --------- --------- --------- --------- --------- $ 713,344 $ 702,898 $ 275,397 $(986,367) $ 705,272 ========= ========= ========= ========= ========= Liabilities and Member's Equity Current liabilities: Current maturities of long-term debt $ 37,100 $ -- $ -- $ -- $ 37,100 Short-term borrowings -- 7,147 13,971 -- 21,118 Accounts payable -- 24,948 38,542 -- 63,490 Accrued expenses and other current liabilities 4,176 31,944 51,154 -- 87,274 --------- --------- --------- --------- --------- Total current liabilities 41,276 64,039 103,667 -- 208,982 Deferred revenue -- -- 34,413 -- 34,413 Long-term debt 398,000 -- -- -- 398,000 Due to subsidiaries 191,508 536,164 148,027 (875,699) -- Other liabilities 100 69,967 14,123 -- 84,190 --------- --------- --------- --------- --------- Total liabilities 630,884 670,170 300,230 (875,699) 725,585 --------- --------- --------- --------- --------- Member's equity: Invested capital 164,289 92,891 17,777 (110,668) 164,289 Accumulated deficit (81,829) (60,163) (24,535) -- (166,527) Accumulated other comprehensive loss -- -- (18,075) -- (18,075) --------- --------- --------- --------- --------- Total member's equity 82,460 32,728 (24,833) (110,668) (20,313) --------- --------- --------- --------- --------- $ 713,344 $ 702,898 $ 275,397 $(986,367) $ 705,272 ========= ========= ========= ========= =========
10 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Condensed Consolidating Statement of Operations and Comprehensive Loss for the three months ended January 1, 2000
Subsidiary Other Consolidated Company guarantors subsidiaries Eliminations totals ------- ---------- ------------ ------------ ------ Net sales $ -- $ 140,289 $ 78,948 $ (33,876) $ 185,361 Cost of goods sold -- 122,590 66,773 (33,876) 155,487 --------- --------- --------- --------- --------- Gross profit -- 17,699 12,175 -- 29,874 Selling, engineering, general and administrative expenses 7,041 11,131 9,730 -- 27,902 Amortization of goodwill -- 1,468 303 -- 1,771 Restructuring charges 4,978 -- -- -- 4,978 --------- --------- --------- --------- --------- Income (loss) from operations (12,019) 5,100 2,142 -- (4,777) Interest income (expense), net 982 (9,290) (1,633) -- (9,941) Other income (expense), net 309 86 (511) -- (116) --------- --------- --------- --------- --------- Loss before income taxes (10,728) (4,104) (2) -- (14,834) Income taxes -- 321 141 -- 462 --------- --------- --------- --------- --------- Loss before cumulative effect of change in accounting principle (10,728) (4,425) (143) -- (15,296) Cumulative effect of a change in accounting principle 302 -- -- -- 302 --------- --------- --------- --------- --------- Net loss (10,426) (4,425) (143) -- (14,994) Other comprehensive loss (1,275) -- -- -- (1,275) --------- --------- --------- --------- --------- Comprehensive loss $ (11,701) $ (4,425) $ (143) $ -- $ (16,269) ========= ========= ========= ========= =========
11 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Condensed Consolidating Statement of Operations and Comprehensive Loss for the three months ended December 30, 2000
Subsidiary Other Consolidated Company guarantors subsidiaries Eliminations totals ------- ---------- ------------ ------------ ------ Net sales $ -- $ 113,399 $ 81,576 $ (21,591) $ 173,384 Cost of goods sold -- 101,108 69,687 (21,591) 149,204 --------- --------- --------- --------- --------- Gross profit -- 12,291 11,889 -- 24,180 Selling, engineering, general and administrative expenses 4,278 7,743 9,734 -- 21,755 Amortization of goodwill -- 1,149 250 -- 1,399 Restructuring charges 1,632 -- -- -- 1,632 --------- --------- --------- --------- --------- Income (loss) from operations (5,910) 3,399 1,905 -- (606) Interest income (expense), net (380) (11,191) (2,161) -- (13,732) Other income (expense), net (37) 97 433 -- 493 --------- --------- --------- --------- --------- Loss before income taxes (6,327) (7,695) 177 -- (13,845) Income taxes -- 253 347 -- 600 --------- --------- --------- --------- --------- Net loss (6,327) (7,948) (170) -- (14,445) Other comprehensive loss -- 992 4,851 -- 5,843 --------- --------- --------- --------- --------- Comprehensive loss $ (6,327) $ (6,956) $ 4,681 $ -- $ (8,602) ========= ========= ========= ========= =========
12 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Condensed Consolidating Statement of Cash Flows for the three months ended January 1, 2000
Subsidiary Other Consolidated Company guarantors subsidiaries totals ------- ---------- ------------ ------ Operating activities Net cash provided by (used in) operating activities $ (7,025) $ 10,488 $ 8,547 $ 12,010 -------- -------- -------- -------- Investing activities Capital expenditures -- (597) (724) (1,321) Investment in equipment held for rent -- -- (714) (714) -------- -------- -------- -------- Net cash used in investing activities -- (597) (1,438) (2,035) -------- -------- -------- -------- Financing activities Net proceeds from short-term borrowings -- -- (3,566) (3,566) Borrowings of long-term debt 14,000 -- -- 14,000 Other 22 -- -- 22 -------- -------- -------- -------- Net cash provided by (used in) financing activities 14,022 -- (3,566) 10,456 -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- (184) (184) -------- -------- -------- -------- Net change in cash and cash equivalents 6,997 9,891 3,359 20,247 Cash and cash equivalents, beginning of period 8,667 4,209 3,988 16,864 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 15,664 $ 14,100 $ 7,347 $ 37,111 ======== ======== ======== ========
13 GROVE WORLDWIDE LLC AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited and in thousands) ================================================================================ Condensed Consolidating Statement of Cash Flows for the three months ended December 30, 2000
Subsidiary Other Consolidated Company guarantors subsidiaries totals ------- ---------- ------------ ------ Operating activities Net cash provided by (used in) operating activities $(14,601) $ 4,848 $ 3,692 $ (6,061) -------- -------- -------- -------- Investing activities Capital expenditures -- (656) (1,478) (2,134) Investment in equipment held for rent -- -- (1,600) (1,600) -------- -------- -------- -------- Net cash used in investing activities -- (656) (3,078) (3,734) -------- -------- -------- -------- Financing activities Net proceeds from short-term borrowings -- -- 151 151 Repayments of long-term debt (900) -- -- (900) -------- -------- -------- -------- Net cash provided by financing activities (900) -- 151 (749) -------- -------- -------- -------- Effect of exchange rate changes on cash -- -- 35 35 -------- -------- -------- -------- Net change in cash and cash equivalents (15,501) 4,192 800 (10,509) Cash and cash equivalents, beginning of period 15,593 (4,598) 5,107 16,102 -------- -------- -------- -------- Cash and cash equivalents, end of period $ 92 $ (406) $ 5,907 $ 5,593 ======== ======== ======== ========
14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the more detailed information and the historical consolidated financial statements included elsewhere in this report. Overview The Company generates most of its net sales from the manufacture and sale of new mobile hydraulic cranes, aerial work platforms and truck-mounted cranes. The Company markets its products through two operating divisions; Grove Crane and National Crane. Grove Crane manufactures mobile hydraulic cranes in its Shady Grove, Pennsylvania and Wilhelmshaven, Germany manufacturing facilities. National Crane manufactures truck-mounted cranes in its Waverly, Nebraska manufacturing facility. The Company also generates a portion of its net sales from after-market sales (parts and service) of the products it manufactures. Sales of used equipment are not material and are generally limited to trade-ins on new equipment through Company-owned distributors in France, Germany, and the United Kingdom. During the years ended October 2, 1999 and September 30, 2000, the Company incurred significant operating losses that would have resulted in non-compliance with certain financial covenants included in the Company's Bank Credit Facility. The Company obtained waivers of these financial covenants as well as certain covenant modifications to help position the Company for future compliance. Nevertheless, future compliance will depend on achieving significantly improved operating results during fiscal 2001 and beyond. Furthermore, modifications of the Bank Credit Facility place significant restrictions on the amount of borrowings available to the Company for working capital purposes, particularly during the period through April 30, 2001, a period during which the Company's need is projected to be the greatest. Management has completed a number of initiatives to help improve operating results and cash flows including: (i) reduction of Manlift operations, (ii) restructuring Shady Grove, Pennsylvania manufacturing operations by improving product flow and (iii) reducing the number of sales, marketing, engineering and administrative employees, principally in Shady Grove and the UK. The reduction of Manlift operations allows the Company to produce a product line which management believes is complementary with the Company's Crane products and strategy. Manlift will continue to provide full support for the installed base of aerial work platforms through parts and service, including discontinued models, and to manufacture six models of boom Manlifts. In order to take advantage of synergies, the Company has merged Manlift's production, engineering and sales and marketing functions with those of Grove Crane. Accordingly, the Company's Manlift operations are discussed with Grove Crane. 15 The following is a summary of net sales for the periods indicated (dollars in millions). Three months ended ------------------ January 1, December 30, 2000 2000 -------- -------- New equipment sold $ 148.1 $ 124.8 After-market 21.9 22.3 Other 15.4 26.3 -------- -------- Net sales $ 185.4 $ 173.4 ======== ======== Results of Operations Three months ended December 30, 2000 (the "fiscal 2001 three months") compared to the three months ended January 1, 2000 (the "fiscal 2000 three months") Net Sales. Net sales decreased $12.0 million, or 6.5%, to $173.4 million for the fiscal 2001 three months from $185.4 million for the fiscal 2000 three months. The decrease in net sales is principally the result of decreased unit sales in the Crane and National Crane segments. Net sales for the Grove Crane division include $25.5 million from the remaining Manlift business. Sales for Grove Crane, excluding the remaining Manlift business, decreased $1.7 million, or 1.3%, to $131.9 million for the fiscal 2001 three months from $130.2 million for the fiscal 2000 three months. The decrease in net sales is primarily the result of lower unit sales. Net sales decreased in both North American and European. Net sales for the National Crane division decreased $3.7 million, or 18.5%, to $16.3 million for the fiscal 2001 three months from $20.0 million for the fiscal 2000 three months. Net sales decreased as the result of lower unit sales and decreased demand for higher priced models. After-market sales did not significantly change in the fiscal 2001 three months from the fiscal 2000 three months. An increase in net sales in North American was offset by a decrease in Europe. Other sales increased by $10.9 million to $26.3 million in the fiscal 2001 three months from $15.4 million in the fiscal 2000 three months. The increase was primarily due to higher government and used equipment sales volumes. Gross Profit. Gross profit decreased $5.7 million, or 19.1%, to $24.2 million in the fiscal 2001 three months from $29.9 million in the fiscal 2000 three months. The decrease in gross profit was attributable primarily to a decline in Crane and National volumes offset by improved manufacturing efficiencies in the Company's US operation. Gross profit as a percent of sales decreased to 14.0% in the fiscal 2001 three months from 16.1% in the fiscal 2000 three months primarily as the result of an unfavorable mix of products sold. Selling, Engineering, General and Administrative Expenses. Selling, engineering, general and administrative expenses ("SG&A") decreased $6.1 million, or 21.9%, to $21.8 million in the fiscal 2001 three months from $27.9 million in the fiscal 2000 three months. SG&A for the fiscal 2000 three months includes approximately $0.9 million of consulting fees paid to the George Group in connection with the completion of their activities. As a percentage of net sales, SG&A was 12.6% in the fiscal 2001 three months and 15.0% in the fiscal 2000 three months. Restructuring charges. During the fiscal 2001 three months, the Company adopted and executed a restructuring plan that resulted in the termination of approximately 220 employees principally in 16 its US operations. In connection with the terminations, the Company accrued severance costs of $1.6 million. During the three months ended December 30, 2000 the Company paid severance costs of $1.8 million related to these terminations and to termination agreements consummated in fiscal 2000. As of December 30, 2000 the Company has remaining severance obligations of $3.2 million, which it expects to pay through April 2002. Interest expense. Interest expense increased $3.8 million to $13.7 million for the fiscal 2001 three months from $9.9 million in the fiscal 2000 three months primarily as the result of higher borrowings on the Company's line of credit and higher rates on those borrowings. Backlog. The Company's backlog consists of firm orders for new equipment and replacement parts. Total backlog as of January 13, 2001 was approximately $134.5 million compared with total backlog as of January 15, 2000 of approximately $204.5 million. Substantially all of the Company's backlog orders are expected to be filled within one year, although there can be no assurance that all such backlog orders will be filled within that time period. Parts orders are generally filled on an as-ordered basis. Liquidity and Capital Resources The Company's business is working capital-intensive, requiring significant investments in receivables and inventory. In addition, the Company requires capital for replacement and improvements of existing plant, equipment and processes. During the three months ended December 30, 2000, the Company used approximately $6.1 million of cash in operating activities primarily as a result of a net loss after non-cash items. During the fiscal 2000 nine months the Company made $1.0 million of payments on its term loan, borrowed $0.1 million of the revolving line of credit and obtained $0.2 million from short-term borrowings. Capital expenditures were $2.1 million for the fiscal 2000 three months and are expected to be approximately $10.5 million for fiscal 2001. During the year September 30, 2000, the Company incurred significant operating losses that would have resulted in non-compliance with certain financial covenants included in the Company's Bank Credit Facility. The Company obtained waivers of these financial covenants as well as certain covenant modifications to help position the Company for future compliance. Nevertheless, future compliance will depend on achieving significantly improved operating results during fiscal 2001 and beyond. Furthermore, modifications of the Bank Credit Facility place significant restrictions on the amount of borrowings available to the Company for working capital purposes, particularly during the period through April 30, 2001, a period during which the Company's need is projected to be the greatest. In addition, the modified covenants require the Company to achieve certain earnings targets on a quarterly basis through fiscal 2001, including a requirement to achieve adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as defined, of $16.5 million for the six months ended March 31, 2001. Adjusted EBITDA, as defined, for the three months ended December 30, 2000 was $6.6 million. As of December 30, 2000, the Company had borrowings of $35.1 million and letters of credit of $5.3 million outstanding under its $66.25 bank revolving credit facility. Based upon eligible amounts of receivables and inventory at December 30, 2000, the Company had available additional borrowings of $19.8 million. Effective April 1, 2001 the maximum amount available under the facility will decline from $66.25 to $60.0 million. During the 14-day period ending April 16, 2001 and the 5-day period ending April 23, 2001, borrowings and outstanding letters of credit under the revolving credit facility will be limited to $40 million and $35 million respectively. 17 Management believes the Company should be able to comply with its existing bank financial covenants and should have sufficient cash flow to meet the Company's obligations as they become due. However, Management is continuing to review the Company's cash flow requirements particularly projected working capital reductions. If the Company is unable to sufficiently reduce working capital, the Company will not be able to reduce total outstanding borrowings and letters of credit below $40 million for the 14-day period ending April 16, 2001 and to below $35 million for the 5-day period ending April 23, 2001, as required by the Bank Credit Facility. If the Company were unable to comply with the covenants in the Bank Credit Facility, in order to avoid default it would be required to obtain additional modifications to its Bank Credit Facility and/or additional sources of funding. There can be no assurance, if needed, that such modifications would be agreed to by the Bank Credit Facility Lenders or such funding, would be available. The Company expects that cash flows from foreign operations will be required to meet its domestic debt service requirements. Such cash flows are expected to be generated from intercompany interest expense on loans the Company has made to certain of its foreign subsidiaries. The loans have been established with amounts and interest rates to allow for repatriation without restriction or additional tax burden. However, there is no assurance that the foreign subsidiaries will generate the cash flow required to service the loans or that the laws in the foreign jurisdictions will not change to limit repatriation or increase the tax burden of repatriation. Certain Subsidiaries of the Company Grove Capital, a Delaware corporation, was organized as a direct wholly owned subsidiary of the Company for the purpose of acting as a co-issuer of the Senior Subordinated Notes and was also a co-registrant of the Registration Statement for the Senior Subordinated Notes relating to the acquisition of The Grove Companies from Hanson Funding (G) PLC and certain of its subsidiaries in April 1998. This was done so that certain institutional investors to which the Senior Subordinated Notes were marketed that might otherwise have been restricted in their ability to purchase debt securities issued by a limited liability company, such as the Company, by reason of the legal investment laws of their states of organization or their charter documents, would be able to invest in the Senior Subordinated Notes. Grove Capital has no subsidiaries, nominal assets, no liabilities (other than the co-obligation under the Senior Subordinated Notes) and no operations. Grove Capital does not have any revenues and is prohibited from engaging in any business activities. As a result, holders of the Senior Subordinated Notes should not expect Grove Capital to participate in servicing the interest and principal obligations on the Senior Subordinated Notes. The payment obligations of the Company and Grove Capital under the Senior Subordinated Notes are fully and unconditionally guaranteed on a joint and several basis by the Subsidiary Guarantors (the "Subsidiary Guarantees'), all of which are wholly owned. The Subsidiary Guarantors are Grove U.S. LLC, a Delaware limited liability company, Grove Finance LLC, a Delaware limited liability company, Crane Acquisition Corp., a Delaware corporation, Crane Holding Inc., a Delaware corporation, and National Crane Corporation, a Delaware corporation. Grove U.S. LLC and National Crane Corporation are the Company's domestic operating subsidiaries and together hold substantially all of the Company's domestic assets. The remaining subsidiaries of the Company, which are foreign subsidiaries, have not issued, and are not expected to issue, Subsidiary Guarantees. No separate financial statements of the Subsidiary Guarantors and Grove Capital are included in this report. The Company considers that such financial statements would not be material to investors because: (i) this report does include, in the notes to the combined and consolidated financial statements of the Company, supplemental financial information, setting forth on a consolidated basis, balance sheets, statements of operations and cash flows information for the Subsidiary Guarantors, the Non-Guarantor Subsidiaries and the Company; and (ii) the above- 18 mentioned note provides sufficient detail to allow investors to determine the nature of the assets held by, and the operations and cash flows of the Subsidiary Guarantors and Grove Capital. The ability of the Company's subsidiaries to make cash distributions and loans to the Company and the Subsidiary Guarantors is not significantly restricted under the terms of the Senior Subordinated Notes, the Indenture governing the Senior Subordinated Notes or the Bank Credit Facility. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are limited so as not to constitute a fraudulent conveyance under applicable law. For more information regarding the assets, liabilities, revenues and cash flows of the Subsidiary Guarantors and the Company's non-guarantor subsidiaries, see note 10 of Notes to the Condensed Consolidated Financial Statements of the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's principal market risk exposure is changing interest rates, primarily changes in short-term interest rates. The Company does not enter into financial instruments for trading or speculative purposes. The Company's policy is to manage interest rates through use of a combination of fixed and floating rate debt. The Company may also use derivative financial instruments to manage its exposure to interest rate risk. As of July 1, 2000, $210.0 million of the Company's long-term debt, which is outstanding under its bank term facility, bears interest at LIBOR plus 4.0% (10.2%). In addition the Company has $225.0 million of Senior Subordinated Notes outstanding bearing interest at a fixed rate of 9.25%. The Company has an interest rate collar to manage exposure to fluctuations in interest rates on $100.0 million of its floating rate long-term debt through September 2001. Under the agreement, the Company will receive on a $100.0 million notational amount, three month LIBOR and pay 6.5% anytime LIBOR exceeds 6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is below 5.19%. The agreement effectively caps the Company's exposure on $100.0 million of its floating rate debt at 6.5% plus an applicable margin as detailed in the Company's bank credit facility. Movement in foreign currency exchange rates creates risk to the Company's operations to the extent of sales made and costs incurred in foreign currencies. The major foreign currencies, among others, in which the Company does business, are the British pound sterling, German mark and French franc. In addition, changes in currency exchange rates can affect the competitiveness of the Company's products and could result in management reconsidering pricing strategies to maintain market share. Specifically, the Company is most sensitive to changes in the German mark relative to the dollar. During the past three fiscal years, currency fluctuations have not had a significant impact on the Company's results of operations. In order to manage currency risk, the Company's practice is to contract for purchases and sales of goods and services in the functional currency of the Company's subsidiary executing the transaction. To the extent purchases or sales are in currencies other than the functional currency of the subsidiary, the Company will generally purchase forward contracts to hedge firm purchase and sales commitments. As of December 30, 2000, the Company was party to one such contract with an aggregate value of $3.5 million. This forward contract matures in January 2001. The Company has not taken any action at this time to hedge its net investment in foreign subsidiaries but may do so in the future. The Company does not have any commodity contracts. 19 PART II Item 1. LEGAL PROCEEDINGS The Company is involved in various legal proceedings that have arisen in the normal course of its operations. The outcome of these legal proceedings is unlikely to have a material adverse effect on the Company. The Company is also subject to product liability claims for which it believes it has adequate insurance. Item 2. CHANGES IN SECURITIES Not applicable. Item 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. Item 5. OTHER INFORMATION Not applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit No. Description of Exhibit 27.1* Financial Data Schedule. - ---------- * Filed Herewith. (b) Reports on Form 8-K Date of report Item reported October 31, 2000 Item 5. (Second Amendment and Waiver to the Credit Agreement) 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GROVE WORLDWIDE LLC Date: February 13, 2001 By /s/ Stephen L. Cripe ------------------------------------------ Stephen L. Cripe Chief Financial Officer (Principal Financial and Accounting Officer) 21 -----END PRIVACY-ENHANCED MESSAGE-----